If you want to make the most money and avoid losing too much, traders usually use three types of analysis: fundamental, technical, and sentiment analysis. Fundamental analysis helps traders figure out how much something is really worth in the market. Technical analysis looks at how something has done in the past to predict how it might do in the future. The last type, sentiment analysis, helps traders understand how other traders are feeling, which can affect the whole market. But, you can never be totally sure which way the market will go, and sometimes you might lose money because things can change really quickly. But, it's always a good idea to do your homework and research before making any decisions.
Fundamental Analysis - short brief
When you're talking about forex trading, fundamental analysis is all about looking at things that could change the prices of money. The central bank plays a big role in this. If they raise interest rates, it could make a currency more valuable in the long run. Other things like GDP, inflation rate, production growth, and NFP releases are also important for people who trade things like oil and gold. The goal is to figure out which countries are doing really well and which ones aren't. The news that comes out every day is really important for people who use fundamental analysis.
Technical Analysis - short brief
Hey there! Did you know that some people who study the stock market think that what happened in the past can help predict what will happen in the future? They use something called trend and chart analysis to try and figure out how prices might change. The stock market is open all day and night, so there's a ton of information for these analysts to look at. They use this information to try and guess what might happen next.
One way they do this is by looking at support and resistance levels. These levels help them decide if they should buy or sell a certain currency. They also use charts that show how prices have changed over time. These charts can give them clues about how much people want to buy or sell a currency. There are also other things they look at, like oscillators and volume and trend indicators, to help them see if prices are going up or down.
But here's the thing: some traders don't think these indicators are always right. They think you need to also look at other important things happening in the market. Just because something happened in the past doesn't mean it will happen again in the future. It's kind of like how just because you did well on a test last week doesn't mean you'll do well on the next one.
If you're interested in learning more about these indicators and how to use them, you can sign up for a webinar with a guy named James Harte. He'll be talking about a bunch of different indicators and how to use them effectively. It could be a cool way to learn more about the stock market!
Sentiment Analysis - short brief
The market is like a roller coaster ride for currencies. It's not just about the basic stuff, but also about how people feel in the moment. This can make currencies go up and down really fast. Sometimes, even if things are going well in the long run, a currency can still go down because everyone is feeling negative. This negative feeling makes most traders want to sell, for some reason. These feelings can help traders decide what to do.
People who study feelings in the market are called contrarians. They invest in the opposite direction of what most people think, because they believe that the market always goes against what people feel, sooner or later. Trading based on feelings alone is pretty risky because it means making trades without all the information. These trades can make the prices go away from what they should be. But if you combine it with other ways of studying the market, it can help you see things more clearly.
All three ways of studying the market are important. The best way for you will depend on how much risk you can handle, how much time you have, and what you want to achieve.